Is That Crickets We Hear? Is Simple (aka BankSimple) Actually Up and Running? Or, The Case of the Missing Next Big Thing

Simple (formerly known as BankSimple) is finally opening its virtual doors to new customers. While arranging a bank depository partnership (necessary to hold customers’ deposits in an FDIC-insured institution) took 2 years longer than founders anticipated, the well-financed start-up, with its impeccable credentials is, apparently, open for business. Or is it?

Every start-up has its can’t miss plan and this is Simple’s: it’s an Alternative to Traditional Banking which appear to mean that it’s a prepaid VISA card with the reporting detail of a traditional online bank and the nimble savings features of SmartyPig.

Simple's Marketing Idea" Prepaid Card as an Alternative to the Banking Industry

The Simple account is accessed online or by mobile device and the account displays both cleared and pending transactions. This allows the Simple interface to show its customers their spendable funds (“safe to spend” which reflects pending transactions, coming bills and savings goals), rather than just the balance based on cleared transactions.

Recurring payments can be scheduled and with both checking and savings functions, customers can allocate direct deposit savings to be parsed multiple ways. An example could be that a customer using direct deposit wants to save $500 a month. There could be a rainy day fund ($100/month), house down payment ($250/month) and a vacation fund ($150/month). Like SmartyPig, Simple can split that single deposit according to the customer’s directive and show each savings bucket separately when the account is viewed.

Searches for Best Savings Option for Each Savings Goal

One of its nifty features is that the Simple software is set up to search for the best savings vehicle for each savings bucket. Without the customer having to set up multiple accounts, Simple can deposit funds into its own variety of accounts (rather like a traditional trust account) which allows the home down payment to go into a longer-term, higher interest rate account while the rainy day fund remains in a traditional savings account and can be accessed at will or even act as an overdraft account.

Two Years to Find a Bank Partner??

So all of this sounds fantastic, but it has taken 2 years to get even the most basic functionality up and running. First there was the problem of the bank partner but now Simple is using The Bancorp Bank ($3.4 billion in assets) and CBW Bank ($8.5 million in assets). Second, there was the lure of account openings but none seem actually to be open.

Back in 2010, 20,000 individuals had registered with Simple, expressing their interest in opening an account with a non-bank committed to doing banking differently. Currently, its CEO, Josh Reich, says that Simple is activating 100-200 accounts a day. But where are those customers? The Net is usually afire with news from early adopters of any technology or service, but to date, the only comments from current Simple customers sound a lot like the chirping of crickets.

If the Site's Up and Running, Where are the Customers?

The site has high expectations to meet, in part because its team includes one of the engineers who helped create Twitter’s technology platform. It has received $13.5 million in start-up funding from the premier early stage investors in Silicon Valley and to date, has been unwilling to discuss the fundamental technology stumbles it must have been encountering. Did Simple get sued by SmartyPig for patent infringement of its patented technology that allows its savers to split a single deposit among multiple “accounts”?

Did customers finally catch on that Simple is simply a prepaid card with a very user friendly interface?

Small businesses can use banks for loans, deposits and payment processing services. The vast majority of those small businesses use banks for their cash and check processing, but as cash based businesses, they haven’t accepted credit cards from their customers. Bank card issuers and processors have always been at a loss for a successful strategy to convert those oh-so-20th century cash and check payments to cards.

Welcome Square

Payments analysts greeted the arrival of Square with intense curiosity and more than a smidgeon of skepticism. Would a start-up be able to distribute free card readers to any merchant, charge transaction fees small merchants would tolerate AND be able to make money while absorbing a seemingly bottomless exposure to risk? The answer to all of those questions appears to be yes. Processing more than $11 million in credit card transactions a day, Square has tapped a brand new market by allowing a million small merchants to switch their preferred transaction type from cash to card. That growth from zero to 1 million merchants happened by word of mouth by a company that cannot afford mass market advertising campaigns.

Payments Industry Turns Gladiatorial

The organic growth and displacement of traditional forms of payments has either flat-lined or regressed. In addition, consumers’ household income continues to fall which means those consumers are cutting back on the services that generate recurring payments. Also, since they have less discretionary income, the overall number of small dollar payments is stagnant (at best).

In brief, the domestic payments industry has stopped growing.

and behaviors are parsed into levels of demographic detail, income, education, race/ethnicity can each correspond to striking different preferences and behaviors.